Reuters: Germany to ban shortselling, tonight

[morganist]

Quote from Ghost of Cutten:

Let's extend this logic a bit. There have been some occasions where third world countries have used guns and it ended poorly for them. I think the idea was for the police and government to uphold the law so the population would be safe.

It didn't end as well as anticipated. Neither police or government acted as was predicted and the third world population got massacred under a dictatorship. I can't remember the details but I will look it up.

In the meantime, let's ban guns and police forces because of it. And tanks. And standing armies. Hell, let's ban governments to avoid this horrible repression in the third world.

no just ban guns.

perhaps there may be some room for interest rate swaps but there are also some dangers. you were all adament there were no issues. i showed you there could be. perhaps neither of use are right. but what i do know is this. i did not say out and out you are wrong, i was willing to hear your opinion. you all said i was out and out wrong and were not willing to listened to my point.

in any event derivatives need assessment.

 

[Options_Noob]

Are they doing this to try and build confidence?

 

[morganist]

Quote from Options_Noob:

Are they doing this to try and build confidence?

i think they're doing it because they don't know what to do and want to make it look like they are doing something.

 

[Illum]

I dunno whats up, got hurt in a gold short I do know that. This has not made euro go up. News was out early today, and euro kept bleeding. I dunno how to trade this.... except I know stopping the shorts did nothing for our banks. Turns out, people were selling longs, it made zero difference. Fear trades should benefit, hard for me to flip around and want to buy gold, but starting to feel like it. I heard this was what killed my gold short... "Bank of Italy allowed lenders to exclude losses on government bonds"

 

[Random.Capital]

I've seen three different versions of this report, ranging from banning "shorting" to banning "naked shorting of CDS".

Is there a definitive statement on what, exactly, they're trying to do? This makes no sense at all unless we're in another "systemic risk" episode.

 

[Pippi436]

Quote from morganist:

there have been some occassions when third world countries have used interest rate swaps and it ended poorly for them. i think the idea was to provide a risk free stream of cash to the third world country in exchange for the higher return and risky cash flow of the third world country.

it didn't end as well as anticipated. neither cash stream acted as was predicted and the third world country lost out. i can't remeber the details i read an article a couple of years ago. i will try to look it up.

If you don't understand the risks involved you can piss away a lot of money with just about any instrument, including futures and forwards (by the way just FYI - a future IS a forward).

A rate swap is a fairly primitive instrument, i don't see how they should be any more dangerous than the rest. Its the most used derivative by the "real" economy and public debt mgmnt, they are straight forward to use and they work. I really fail to see your point.

 

[morganist]

Quote from Pippi436:

If you don't understand the risks involved you can piss away a lot of money with just about any instrument, including futures and forwards (by the way just FYI - a future IS a forward).

A rate swap is a fairly primitive instrument, i don't see how they should be any more dangerous than the rest. Its the most used derivative by the "real" economy and public debt mgmnt, they are straight forward to use and they work. I really fail to see your point.

a future is the contract and it is sold on a open market. a forward is a future agreement to deliver and is between two institutions not an open market in the same way a future is. they are different.

please don't try to undermine the separation of the two. i still don't think you are seeing my point. that is what is pissing me off.

surely they are not working if there is huge problems with private and public debt at the moment?

 

[Pippi436]

Quote from morganist:

a future is the contract and it is sold on a open market. a forward is a future agreement to deliver and is between two institutions not an open market in the same way a future is. they are different.

please don't try to undermine the separation of the two. i still don't think you are seeing my point. that is what is pissing me off.

Doesn't make my statement untrue. Go get your Hull edition from the shelf.

Quote from morganist:


surely they are not working if there is huge problems with private and public debt at the moment?

Surely swaps got nada to with it? Explain the qualitative difference of economic danger in hedging rate risk with i.e. bunds versus a similar swap. I'm very sorry that you are pissed off, but there is still no point to see. Hopefully it will emerge in your next post.

 

[jprad]

Quote from Angrycat:

says the guy who has no idea what he's talking about. Do some research - by people with actual degrees in subjects like economics and finance instead of reading ramblings written by old cranks on message boards churning their retirement portfolios.

here's one article, for instance. Try to chew through it before you post rubbish about naked short selling again:

http://www.cato.org/pubs/regulation/regv31n1/v31n1-6.pdf

The missing piece in any argument for naked shorting is the fact that you can end up with more shares owned then the available float since there is a limitless supply of fictional shares that can be naked shorted.

When enough well-capitalized entities who are able to naked short pile on simultaneously the stock will get pummeled into oblivion.

BSC? LEH?

Are you going to seriously try to say that naked shorting didn't contribute in the slightest to the downfall of those two?

 

[Ghost of Cutten]

Quote from morganist:

no just ban guns.

perhaps there may be some room for interest rate swaps but there are also some dangers. you were all adament there were no issues. i showed you there could be. perhaps neither of use are right. but what i do know is this. i did not say out and out you are wrong, i was willing to hear your opinion. you all said i was out and out wrong and were not willing to listened to my point.

in any event derivatives need assessment.

No guns? That means the police and army will be unarmed. The downsides would massively outweigh the upsides, and it would prevent legitimate people using guns for the necessary job they are designed for - just as banning derivatives would have far more downsides than upsides, and would prevent legitimate hedging and accurate investment, speculation and trading decisions from taking place.

No one has ever said that trading was risk free. So don't act like a scumbag politician by pretending that we said otherwise. You can lose money in anything - real estate, bank loans, start-ups, blue chip business, government bonds etc. Derivatives are simply a tool for transferring risk. Like any tool, if clueless morons use them idiotically to take insane risks on way too much leverage, then they will sometimes get hurt. But it is the idiocy that is to blame, not the tool - don't shoot the messenger. And the biggest losses in the last 2 years came not from derivatives but from plain old residential housing and plain vanilla bank loans. Shall we ban home ownership and bank loans too?